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Silver Pool Accounts: Use Extreme Caution

[silver coins]

A silver pool account, or unallocated storage account, is a precious metal account deposit in which one does not have title to specific (allocated) silver bars or silver coins. The way it works is that, essentially, when you invest money into a silver pool, you own a defined, but unallocated interest in a pool of silver held by someone else.
This is the polar opposite of what I recommend.

The Claims

Silver pool accounts claim that they allow you to "diversify your portfolio and enhance your investment strategies” without having to pay additional charges such as premiums, bar charges, shipping, and insurance until you’re ready to take possession of physical bullion products.

Pool accounts claim to give you better (instant) access to the precious metals markets without the need to go through brokers or traders. With no required minimums, you can use pool accounts to make an initial purchase and accumulate ounces over time.

Furthermore, most precious metal pools claim that you pay no safety deposit fees or monthly depository charges.

The Reality

Although pool accounts may sound great on the surface, I find it particularly difficult to imagine, under these circumstances, easily cashing out and taking possession on even a moderate price increase. Of course, the managers of these accounts must claim that you are entitled to receive physical bullion upon payment of fabrication charges. This begs the question: What are these charges subject to?

When exchanging pool account holdings for physical metals, a small premium plus shipping and handling charges are applicable. How will the price of oil affect these charges?

Keep in mind that silver coin investing is not a get-rich-quick deal. This should be a long-term relationship. By the time you cash out, if you ever do, who can guess what the shipping cost will be?

Are you willing to chance these charges when prices really move up? Remember, the fees you pay in the future will likely reflect a much more diluted dollar.

With regard to safety deposit fees and monthly depository charges, the most likely scenario is that they simply don't have the metal. As a silver investor, you should always expect a storage fee—even when you store it yourself!

A Better Way

This is why I always recommend going to the coin shop on “your own dime” and buying the lowest-premium coins available. I prefer silver rounds or 90% (pre-1965) junk coins. Even if you are a large investor ($100,000 or more), you would be much better off paying 1% of your total investment for storage, and knowing that the silver is yours, than saving that 1% storage fee, but having an uncertain investment overall.

Rather than take the risk, just go to the local coin shop. Most coin shops can order whatever quantity of the silver coins you want. Take it home, lock it away and go about your business.

You can get a better understanding of why I believe silver pool accounts are risky by reading more about silver coins.

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